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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
(FEE REQUIRED)
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
SECURITIES ACT OF 1934 (NO FEE REQUIRED)
FOR THE FISCAL YEAR ENDED APRIL 2, 1995 COMMISSION FILE NO. 1-7604
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CROWN CRAFTS, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-0678148
(State of Incorporation) (I.R.S. Employer Identification No.)
1600 RIVEREDGE PARKWAY, 30328
SUITE 200 (Zip Code)
ATLANTA, GEORGIA
(Address of principal executive offices)
Registrant's Telephone Number, including area code: (404) 644-6400
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
COMMON STOCK, $1.00 PAR VALUE
(TITLE OF CLASS)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
As of June 15, 1995, 8,576,059 shares of Common Stock were outstanding, and
the aggregate market value of the Common Stock (based upon the NYSE closing
price of these shares on that date) held by persons other than Officers,
Directors, the Company's Employee Stock Option Plan, and 5% shareholders was
approximately $106,589,000.
DOCUMENTS INCORPORATED BY REFERENCE:
CROWN CRAFTS, INC., PROXY STATEMENT IN CONNECTION WITH ITS ANNUAL MEETING
OF SHAREHOLDERS ON AUGUST 8, 1995 (PART III)
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PART I
ITEM 1. BUSINESS
GENERAL
Crown Crafts, Inc. (the "Company") designs, manufactures and markets
two principal product categories: comforters and accessories, and
jacquard-woven cotton products. These products are marketed under the Crown
Crafts and Goodwin Weavers trademarks, under other Company-owned trademarks and
under trademarks licensed from others, and without trademarks as unbranded
merchandise or with customers' private labels.
The Company designs its products to the style standards of major
national department stores, but manufactures products across a broad spectrum
of retail price points. The Company believes that it is the fifth largest
domestic manufacturer of comforters, comforter sets and bedspreads with a total
market share of approximately 9%, and that it is the largest domestic
manufacturer of 100% cotton jacquard-woven bedspreads and throws with a total
market share of approximately 28%.
Crown Crafts, Inc., a Georgia corporation, began operating in 1957 as
a manufacturer of tufted bedspreads and in 1967 added jacquard-woven bedspreads
to its product line. From the early 1970s until fiscal 1982, the Company
principally produced flocked (crushed velvet) bedspreads and draperies. Since
1984 the Company has designed, marketed and manufactured comforters and
accessories. The Company began producing and marketing jacquard-woven cotton
throws in 1987.
In April 1995, the Company acquired all of the stock of the
privately-held Textile, Inc. ("Textile"), a contract manufacturer of
jacquard-woven products located in Ronda, North Carolina. The acquisition
provided the Company with immediate access to weaving capacity. During fiscal
1995, the Company also merged two of its wholly-owned subsidiaries with and
into itself to achieve administrative efficiencies.
PRODUCTS
COMFORTERS AND ACCESSORIES
The Company's line of comforters and accessories includes a broad
range of home textile products consisting of comforters, comforter sets,
sheets, pillowcases, pillow shams, bedskirts, duvet covers, daybed sets, window
treatments and decorative pillows. These products are made from all cotton or
cotton/polyester blended fabrics ranging in thread count from 130 to 330
threads per inch. All comforters are filled with polyester fiberfill. The
Company offers these products in a wide variety of styles and patterns from
solid colors to designer prints.
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Comforters and accessories are marketed primarily by the Company's own
sales and marketing staff. The customers for these products are department
stores, chain stores, mass merchants, specialty home furnishings stores,
wholesale clubs, and catalog and mail order houses. The products in this
category are produced primarily at the Company's facilities in Roxboro, North
Carolina (the "Roxboro Plant").
The Company believes there is a continuing trend toward coordination
of the bedroom, and expects to continue its emphasis on comforter sets with
coordinated sheets and accessories. Additionally, through licensing, the
Company's designs have begun to be offered in related areas such as bath
accessories, wall paper borders and furniture benches.
JACQUARD-WOVEN COTTON PRODUCTS
The Company's line of jacquard-woven cotton products includes 100%
cotton throws, bedspreads, rugs and blankets. The throws, which are
manufactured in a variety of colors and designs, are appropriate for use not
only as decorative accessories, but as lap blankets and wall hangings. The
majority of jacquard-woven cotton products are manufactured and warehoused at
the Company's facilities in Dalton, Chatsworth and Calhoun, Georgia. Throws are
also manufactured at the Textile facility in Ronda, North Carolina. Some of the
Company's throws, including all printed throws, are also manufactured in
Mexico.
The Company's marketing strategy is to continue to be the leading
domestic producer of cotton throws, with innovative design features developed
by its design staff or licensed from others. The jacquard-woven cotton throws
are sold by retailers and gift shops.
PRODUCT DESIGN
The key components to the Company's successful marketing strategy are
design and color. The Company's designs include traditional, contemporary,
textured and whimsical patterns. The Company is continually developing new
designs for both the bedcoverings and throws.
The Company employs a design and product development staff of
approximately 75 persons (including part-time and full-time designers) who work
closely with the marketing staff to develop new designs. The Company obtains
its designs from numerous sources, including graphic artists, decorative fabric
manufacturers, apparel designers, the Company's employees and museums. The
Company utilizes computer aided design systems to increase its design
flexibility and reduce costs. In addition, these systems significantly shorten
the time for responding to customer needs and
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changing market trends. Many of the Company's designs are created for exclusive
sale by certain of its customers.
SALES AND MARKETING
The Company markets its products throughout the United States and
Canada through its own sales force of 30 salaried sales executives and
employees. The Company also utilizes 7 independent commissioned sales
representatives, who principally sell the Company's products. Additionally, the
Company markets its jacquard-woven throws to the gift trade through its Goodwin
Weavers division. The Company's primary showroom and sales office is located in
New York City. Other sales offices are maintained in Chicago, San Francisco,
Atlanta, Boston, Tyler, Texas and Bellevue, Washington. Additional showrooms
are located in the Company's Atlanta executive office location and in the
Atlanta Merchandise Mart. The Goodwin Weavers division utilizes one salaried
and approximately 150 independent commissioned sales representatives to call on
gift stores. Goodwin Weavers has also established showrooms in the Atlanta
Merchandise Mart and in High Point, North Carolina. Sales outside the United
States and Canada are primarily through distributors.
Except for international sales and sales by the Company's outlet
stores, the Company's products are sold directly to the retail trade. The
Company generally introduces new products to the retail trade during the April
and October industry home textile markets. Most sales of successful new designs
generally occur at least six months after the product introduction as more
conservative buyers follow the lead of market innovators. New product
introductions for the gift shop trade are concentrated in January-March and
June-August when Goodwin Weavers participates in approximately 30 local and
regional gift shows. Private label products manufactured by the Company are
introduced throughout the year.
The Company uses visually appealing and informative packaging,
point-of-sale displays and advertising materials for retailers. Most of these
are produced in the Company's own print shop, which offers design, typesetting
and finishing services. The Company also regularly advertises its products in
publications directed to the trade.
MANUFACTURING
The Company has made and continues to make significant investments in
modernization and expansion to lower its costs, maximize design flexibility,
improve quality and service, and increase its productive capacity.
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The Company's comforters and accessories are produced at the Roxboro
Plant. The Roxboro Plant, which includes a new 50,000 square foot finished
goods warehouse, utilizes an automated warehouse and distribution system
allowing the Company to reduce inventories, improve physical control over
inventories, reduce order fulfillment lead times, and provide enhanced levels
of service.
The Company believes that its jacquard weaving capacity is the most
modern in the United States. The Company produces its jacquard-woven cotton
products at its weaving mills in Dalton, Georgia and Ronda, North Carolina.
These products are finished, packed and shipped from the Calhoun, Georgia
plant. The Company also uses a warehouse and distribution center in Chatsworth,
Georgia. The Company is currently constructing a new 90,000 square foot weaving
facility in Dalton, Georgia. This expansion which is expected to become
operational in August 1995 will house 40 new air-jet looms and, coupled with
the Textile acquisition, will more than double the Company's weaving capacity.
In fiscal 1995, construction was completed on a 125,000 square foot
warehouse and distribution facility in Calhoun, Georgia near the finishing
plant. This facility became operational in July 1994. The Company is currently
expanding by about 85 percent the square footage of this facility. This
expanded warehouse and distribution center will enable the Company to continue
to increase its efficiency and improve on-time deliveries of its products.
OUTLET STORES
The Company also markets its products through its outlet stores. The
outlet stores offer the Company the opportunity to sell closeout and irregular
products. Approximately half of the total sales from the outlet stores in
fiscal 1995 were attributable to the Calhoun, Georgia and Blowing Rock, North
Carolina stores.
RAW MATERIALS
The principal raw materials used in the manufacture of comforters,
sheets and accessories are wide-width printed and solid color cotton and
polycotton fabrics, and polyester fibers used as filling material. The
principal raw materials used in the manufacture of jacquard-woven cotton
products are natural-color and pre-dyed 100% cotton yarns. Although the
Company usually maintains supply relationships with only a limited number of
suppliers, the Company believes these raw materials presently are available
from several sources in quantities sufficient to meet the Company's
requirements.
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The Company uses significant quantities of cotton, which is subject to
ongoing price fluctuations. The price fluctuations are a result of cotton being
an agricultural product subject to weather patterns, disease and other factors
as well as supply and demand considerations, both domestically and
internationally. To reduce the effect of potential price fluctuations, the
Company often makes commitments for future purchases of cotton, cotton yarns
and fabrics up to a year before delivery. Nonetheless, significant increases in
the price of cotton yarn or cotton or polycotton print cloth could adversely
affect the Company's operations.
SEASONALITY, INVENTORY MANAGEMENT
Historically, the Company has experienced a seasonal sales pattern,
with a greater sales volume in the last three fiscal quarters of the year (July
through March). Primarily, this is a result of the Company's retail customers
having higher sales in the second half of the year. It is likely that the
Company's operating performance in the first fiscal quarter of each year will
be less favorable than operating performance in the last three fiscal quarters.
The Company carries normal inventory levels to meet delivery
requirements of customers. Customer returns of merchandise shipped are not
material. Inventories are valued at the lower of cost or market. Cost is
determined on a first-in, first-out basis. Inventories as of April 2, 1995
decreased slightly to $44,909,000 as compared to $45,122,000 as of April 3,
1994. Improved inventory management procedures and operating efficiencies
achieved at the Company's automated warehouses in Roxboro, North Carolina and
Calhoun, Georgia enabled the Company to reduce inventory levels while servicing
a 13% increase in net sales during fiscal 1995.
BACKLOG ORDERS
Backlog orders for future delivery believed by management to be firm
were $16,277,000 and $17,029,000 at May 26, 1995 and May 27, 1994,
respectively.
TRADEMARKS, COPYRIGHTS
The Company's products are marketed in part under well-known
trademarks. The Company considers its trademarks to be of material importance
to its business. Comforters and accessories primarily carry the trademark Crown
Crafts(R), and the majority of jacquard-woven cotton products carry the
trademarks of Crown Crafts(R) and Goodwin Weavers(R). Protection for these
marks is obtained through domestic and foreign registrations. Also important to
the Company is the trademark Royal Sateen(R), which was developed in a joint
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effort of the Company and Kitan Consolidated, Ltd. of Israel. Kitan is the
registered owner of the mark and the Company is the exclusive marketer of Royal
Sateen products in the United States and other parts of the Western Hemisphere.
In addition, certain products are manufactured and sold pursuant to
licensing agreements that include, among others, the following trademarks: Bob
Timberlake(TM), Colonial Williamsburg(R), Department 56(R) and Ungaro(R). The
license agreements for the Company's designer brands generally are for a term
of 3 to 6 years, and may or may not be subject to renewal; no one of these
licenses has accounted for more than 9% of the Company's total sales volume
during any of the last five fiscal years. In addition, the Company has licensed
and has sold fabric for certain of its more successful designs to manufacturers
of other products, although revenue from this activity has not been material.
The Company believes licensing in both directions will grow in importance as
the Company grows.
Many of the designs used by the Company are copyrighted by other
parties including trademark licensors and are available to the Company through
copyright licenses. Other designs are the subject of copyrights owned by the
Company.
CUSTOMERS
The Company's customers consist principally of department stores,
chain stores, mass merchants, specialty home furnishings stores, wholesale
clubs, gift stores and catalogue and mail order houses. During the fiscal years
ended April 2, 1995, April 3, 1994 and March 28, 1993, respectively, sales to
Wal Mart Stores, Inc. accounted for 17.3%, 16.1% and 17.3% of total net sales.
The Company's sales to JCPenney Company constituted 11.8% of net sales in
fiscal 1994. The Company believes that its relationships with both Wal Mart and
JCPenney are excellent and that the loss of either customer is unlikely.
COMPETITION
The home textile industry, including the market for comforters and
accessories and for jacquard-woven cotton products, is highly competitive. The
Company and its subsidiaries compete with a variety of manufacturers.
Competitors may have existing relationships with certain customers which may be
superior to those of the Company and may have substantially greater resources.
The Company competes on the basis of quality, design, price, service
and packaging. Except for hand-made quilts, acrylic throws, luxury linens,
matelasse coverlets and bedspreads and
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cotton rugs, the Company's products have not experienced significant
competition from imports. The Company believes that its ability to implement
future price increases for its products may be limited by current or future
overcapacity in the domestic textile industry.
RESEARCH AND DEVELOPMENT
The Company believes that research and development is important in
establishing a competitive position for its products. The Company's product
development activities include the styling efforts necessary to introduce new
patterns and designs, and the development of new products or variations of
existing products. The product development expenses were approximately
$4,902,000 in 1995, $4,239,000 in 1994 and $3,477,000 in 1993.
GOVERNMENT REGULATION; ENVIRONMENTAL CONTROL
The Company is subject to various federal, state and local
environmental laws and regulations which regulate, among other things, the
discharge, storage, handling and disposal of a variety of substances and
wastes. The Company's operations are also governed by laws and regulations
relating to employee safety and health, principally the Occupational Safety and
Health Administration Act and regulations thereunder.
The Company believes that it presently complies in all material
respects with applicable environmental, health and safety laws and regulations.
Although the Company believes that future compliance with such existing laws or
regulations will not have a material adverse effect on its capital
expenditures, earnings or competitive position, there can be no assurances that
such requirements will not become more stringent in the future or that the
Company will not incur significant costs in the future to comply with such
requirements.
EMPLOYEES
At April 2, 1995 and June 15, 1995, the Company had 2,148 employees.
At June 15, 1995, of these 2,148 employees, approximately 1,762 were employed
in the Company's manufacturing operations, approximately 134 in sales and
approximately 252 in administration.
None of the Company's employees is represented by a labor union, and
the Company considers its relationship with its employees to be good. The
Company attracts and maintains qualified
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personnel by paying competitive salaries and benefits and offering
opportunities for advancement.
INTERNATIONAL SALES
The Company is not currently engaged in material operations in foreign
countries. The Company believes, however, its presence in foreign countries
will increase in the future as a result of, among other factors, the passage of
NAFTA and the expansion of its sales efforts in Europe, Japan, Mexico and
Australia. Although the Company had planned substantial sales growth in Mexico
in fiscal 1996 in connection with its strategic alliance with the Mexican
textile company, Grupo Textil San Marcos, as a result of the devaluation of the
peso and the resulting impact on the Mexican economy, the Company now expects
to make only a minor amount of export sales to Mexico during the fiscal year.
The Company did not export a significant amount of product to Mexico in fiscal
1995.
ITEM 2. PROPERTIES
The Company's headquarters are located in executive offices in
Atlanta, Georgia. A showroom is also located in these offices. The Company
occupies approximately 34,520 square feet at this location under a lease that
commenced April 1, 1994, and expires June 29, 2002.
The Company has acquired property in Dalton, Georgia upon which a new
90,000 square foot weaving facility is being constructed. The facility is
scheduled to become operational by August 1995.
The following table summarizes certain information regarding the
Company's principal properties. The Company's Georgia manufacturing facilities
are operating, on average, at approximately 87% of productive capacity. The
Company's North Carolina facilities are operating, on average, at approximately
76% of productive capacity.
Approximate Owned/
Location Use Square Feet Leased
Calhoun, Georgia Two Buildings, housing offices, 267,000 Owned
manufacturing facilities, sample
department, print shop and factory
outlet store
Calhoun, Georgia Warehouse and distribution center 233,000 Owned(1)
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Chatsworth, Georgia Manufacturing facility, warehouse and 115,000 Owned
distribution center
Dalton, Georgia Manufacturing facility 161,000 Owned(2)
Ronda, North Carolina Two buildings, housing offices, 62,820 Owned
manufacturing facility and warehouse
Atlanta, Georgia Executive offices and showroom 34,520 Leased(3)
Roxboro, North Three buildings, housing 424,000 Owned
Carolina manufacturing facilities, warehouse
and distribution centers,
administrative offices and factory
outlet store
Roxboro, North Six buildings, housing manufacturing 378,000 Leased(4)
Carolina facilities, warehouses and
distribution facilities
Blowing Rock, North Three buildings, housing 21,000 Owned
Carolina administrative and sales offices, and
factory outlet store
New York, New York Sales and design offices and showroom 23,000 Leased(5)
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(1) Includes the 108,000 square foot expansion of this facility currently under
construction.
(2) Includes the new 90,000 square foot weaving facility currently under
construction.
(3) Lease expires June 29, 2002
(4) Leases expire as follows:
(a) 75,000 square feet on February 28, 2005;
(b) 30,000 square feet on July 22, 1995 (renewable for one five-year
period);
(c) 50,000 square feet on September 30, 1997 (renewable for one five-year
period); and
(d) 223,000 square feet on April 30, 1998 (renewable for one five-year
period).
(5) Leases expire December 31, 1996.
The Company also leases space for its various sales offices and outlet
stores.
Management believes that its properties are suitable for the purposes
for which they are used and are in generally good condition.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is a party to various legal proceedings
arising in the ordinary course of business. The Company is not currently
engaged in any material legal proceedings.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the year ended April 2, 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company is authorized by its Articles of Incorporation to issue up
to 15,000,000 shares of capital stock, all of which are designated Common
Stock, par value $1.00 per share.
COMMON STOCK
The Company's common stock (the "Common Stock") is traded on the New
York Stock Exchange ("NYSE") under the symbol "CRW". Prior to December 16,
1994, the Company's Common Stock was traded on the American Stock Exchange
("AMEX") under the same symbol.
The following table presents quarterly information on the price range
of the Company's Common Stock for the two fiscal years ended April 2, 1995.
This information indicates the high and low sale prices reported by either the
NYSE or AMEX for the time period during which the Common Stock was traded on
that exchange.
QUARTER High Low
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FISCAL 1995
First Quarter 21-3/8 17-7/8
Second Quarter 19-3/4 14-1/8
Third Quarter 16-3/8 14-3/8
Fourth Quarter 17-1/8 14-3/4
FISCAL 1994
First Quarter 17-3/8 13-1/4
Second Quarter 16-7/8 13
Third Quarter 19-5/8 15-3/4
Fourth Quarter 21-7/8 17-3/8
As of June 15, 1995 there were issued and outstanding 8,576,059 shares
of the Company's Common Stock held by approximately 1,700 beneficial holders.
The estimated number of beneficial holders does not reflect the approximately
1,300 individual employee accounts in the Company's Employee Stock
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Ownership Plan. At June 15, 1995, the Company's Common Stock closed at $17.125.
In fiscal 1995, the Company continued its policy, begun in February
1989, of paying dividends on a quarterly basis. The Company paid a dividend of
$0.03 per share on its Common Stock on June 28, 1994, September 27, 1994,
December 27, 1994 and March 21, 1995. Dividends paid by the Company on its
Common Stock in the future will depend upon the earnings and financial
condition of the Company. The Company presently anticipates paying dividends
for the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below are derived from the
Company's financial statements for the five years ended April 2, 1995. The data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
related notes included elsewhere in this Annual Report.
YEAR ENDED
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($ in thousands, except per share amounts.)
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FOR THE YEAR April 2, April 3, March 28, March 29, March 31,
1995 1994* 1993 1992 1991
Net sales $210,963 $187,335 $151,256 $122,698 $121,905
Gross profit 46,731 37,998 29,885 26,635 25,683
Earnings from operations 18,883 15,376 11,377 10,940 11,900
Net earnings 11,050 9,010 7,339 6,313 6,714
Net earnings per share 1.31 1.08 0.89 0.91 0.97
Cash dividends per share 0.12 0.12 0.12 0.12 0.12
* Fiscal 1994 contained 53 weeks
AT YEAR END
Total assets $134,031 $123,348 $108,641 $ 88,564 $ 65,687
Long-term debt 5,000 10,000 15,000 17,000 19,000
Shareholders' equity 87,000 75,385 66,325 59,225 34,258
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales by major product category were as follows during each of the
three fiscal years in the period ended April 2, 1995 (in thousands):
1995 1994 1993
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Comforters and accessories $110,689 $114,470 $ 97,009
Jacquard-woven cotton products 91,302 67,885 49,066
Other 8,972 4,980 5,181
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$210,963 $187,335 $151,256
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Consolidated net sales increased by 12.6% in 1995 and 23.9% in 1994. The
Company's fiscal year end is the Sunday nearest March 31. The 1995 and 1993
sales reflect 52 weeks of operations compared to 53 weeks for 1994.
Net sales of comforters and accessories declined 3.3% in 1995. In
addition to the impact of one less week of operations, import quota restrictions
on hand-made quilts from China and quality problems in fabrics manufactured by
the Company's supplier for the popular Royal Sateen(R) luxury product line had a
significant effect on net sales for the current year. As a result of the fabric
quality problems which were related to Egyptian cotton supplies, the Company
received only sporadic shipments of acceptable material during the last six
months of the fiscal year. The quality problems have been resolved and the
Company has returned to normal customer service levels for these products. Net
sales of comforters and accessories increased by 18.0% in 1994 due primarily to
increased unit sales.
The jacquard-woven cotton products category continued its strong growth
with a net sales increase of 34.5% in 1995 which followed a 38.4% increase in
1994. This product category includes cotton throws, bedspreads, blankets, and
rugs. The increase in 1995 was attributable primarily to increased unit sales of
cotton throws and matelasse bedspreads, while the 1994 increase was due mainly
to increased unit sales of cotton throws.
The Company expects a long-term worldwide trend of increased demand for
jacquard-woven cotton products. The manufacturing capacity expansion completed
during fiscal 1995, plus significant production from the Company's strategic
partner in Mexico have not
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been sufficient to meet the demand for these products. To support this growth,
the Company has started construction on capital projects that will triple
production capacity for matelasse bedspreads and increase cotton throw capacity
by over fifty percent. These capital projects include a new 90,000 square foot
weaving plant in Dalton, Georgia which will house 40 state-of-the-art air-jet
looms, and an expansion of the distribution center in Calhoun, Georgia. These
projects will be completed during the second fiscal quarter of 1996 in time to
meet the demand of the peak shipping season. The total estimated cost of these
projects is approximately $20 million.
In addition to these capital expansion projects, during April the
Company acquired all of the stock of Textile, Inc., a contract manufacturer of
jacquard-woven cotton products located in Ronda, North Carolina. This
acquisition provided the Company with immediate access to weaving capacity to
meet the growing demand for cotton throws. The cost of the acquisition was not
significant. Even after the new Dalton weaving facility begins operations,
production from the Textile, Inc. acquisition will be needed to satisfy the
expected strong demand for jacquard-woven cotton products.
During fiscal 1994, the Company made contractual arrangements to have
certain products manufactured for it in Mexico by Grupo Textil San Marcos ("San
Marcos"). As part of these arrangements, San Marcos also purchases products from
the Company for sale in Mexico and Latin America. The Company did not export a
significant amount of product to San Marcos in fiscal 1995. Although the Company
had planned substantial growth in this export market for fiscal 1996, it now
appears that as a result of the devaluation of the peso and the resulting impact
on the Mexican economy, the Company will make only a minor amount of export
sales to Mexico during the fiscal year. The volume of finished products which
the Company purchases from Mexico for sale to its customers in the United States
has not been affected by the devaluation and is not expected to be impacted in
the future.
Gross margin was 22.2% in 1995, 20.3% in 1994 and 19.8% in 1993. The
increase in gross margin is attributable to continued efficiency improvements in
the Company's automated manufacturing and warehousing operations.
Marketing and administrative expenses increased 23.1% in 1995 and 22.2%
in 1994. The increase in 1995 was primarily attributable to increased staffing
and occupancy costs to support the overall growth of the Company's business. In
1994, the increase was due primarily to increased sales commissions paid to
independent sales representatives. This was due to the growth in commission
sales and was expected. Also contributing to the 1994 increase were
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increased staffing and occupancy costs to support the overall growth of the
Company's business.
Interest expense is net of capitalized interest of $125,000 in 1995,
$407,000 in 1994 and $918,000 in 1993. Excluding the effect of interest
capitalized, interest expense increased 7.7% in 1995 and 10.4% in 1994. The
increase in interest expense before capitalization of interest was due to higher
levels of average total debt outstanding in both 1995 and 1994.
The effective income tax rate was 36.8% in 1995, 36.2% in 1994 and
34.5% in 1993. The increase in 1995 was due to higher effective state income tax
rates. The increase in 1994 was due to the effect of the increase in the maximum
corporate federal income tax rate.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position remains quite strong. Shareholders'
equity increased $11.6 million to $87.0 million at April 2, 1995. The ratio of
debt to equity was 0.3:1 at both April 2, 1995 and April 3, 1994. Total
inventory declined slightly to $44.9 million at April 2, 1995 from $45.1 million
at April 3, 1994.
Working capital decreased to $37.0 million at April 2, 1995 from $40.6
million at April 3, 1994 as the Company utilized funds provided by operations
and borrowings under its short-term credit lines to fund capital expenditures of
$18.9 million and repay $5.0 million of long-term debt. The capital expenditures
were primarily in connection with the construction of the Calhoun Distribution
Center and the purchase of additional weaving equipment for existing Georgia
locations.
The Company maintains, with two banks, lines of credit aggregating
$30.0 million which are used as needed. Interest rates float and are quoted
daily, and do not exceed the banks' prime lending rates. No fees or
compensating balances are required under these arrangements. The lines are
cancelable at the banks' discretion. Total borrowings outstanding under these
lines at April 2, 1995 were $15.1 million. See Note 3 of Notes to Consolidated
Financial Statements.
As a cash management practice and to reduce its exposure to bad debts,
the Company factors substantially all of its trade accounts receivable. The
Company's factor establishes customer credit lines, and accounts for and
collects receivables balances. The factor remits payment to the Company on the
due dates of the factored invoices. The Company does not take advances against
its factored receivables balances. The factor assumes all responsibility for
credit losses on sales within approved credit lines, but may deduct from its
payment to the Company the amounts
14
16
of customer deductions for returns, allowances, disputes and discounts. The
Company's factor may, at any time, terminate or limit its approval of shipments
to a particular customer. If such termination occurs, the Company may either
assume the credit risk for shipments after the date of such termination or
cease shipments to such customer.
The Company expects that its total capital expenditures for property,
plant and equipment will be approximately $29.0 million in fiscal 1996. This
includes the capital projects described under "RESULTS OF OPERATIONS" and other
capital expenditures to improve operating efficiencies or increase capacity.
These expenditures will be at least partially funded by cash generated from
operations. The Company believes it has adequate sources of debt financing to
meet its needs.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages F-1 through F-12 herein.
15
17
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Financial Statements: Page
Independent Auditor's Report F-2
Consolidated Balance Sheets as of F-3
April 2, 1995 and April 3, 1994
Consolidated Statements of Earnings F-4
for the Three Fiscal Years in the
Period Ended April 2, 1995
Consolidated Statements of Changes in F-5
Shareholders' Equity for the Three Fiscal
Years in the Period Ended April 2, 1995
Consolidated Statements of Cash Flows F-6
for the Three Fiscal Years in the
Period Ended April 2, 1995
Notes to Consolidated Financial F-7
Statements
Note #1 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Note #2 - INVENTORIES
Note #3 - FINANCING ARRANGEMENTS
Note #4 - INCOME TAXES
Note #5 - LEASE COMMITMENTS
Note #6 - STOCK OPTIONS
Note #7 - EMPLOYEE STOCK OWNERSHIP PLAN
Note #8 - COMMITMENTS
Note #9 - SEGMENTS AND MAJOR CUSTOMERS
Supplemental Financial Information:
Selected Quarterly Financial Information (unaudited) F-12
F - 1
18
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Crown Crafts, Inc.:
We have audited the accompanying consolidated balance sheets of Crown Crafts,
Inc. and subsidiaries as of April 2, 1995 and April 3, 1994, and the related
consolidated statements of earnings, changes in shareholders' equity, and cash
flows for each of the three years in the period ended April 2, 1995. Our audits
also included the financial statement schedule listed at Item 14. These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Crown Crafts, Inc. and
subsidiaries as of April 2, 1995 and April 3, 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
April 2, 1995 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Atlanta, Georgia
June 2, 1995
- --------------------------------------------------------------------------------
F-2
19
- --------------------------------------------------------------------------------
CROWN CRAFTS, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
APRIL 2, April 3,
($ in thousands) 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash $ 567 $ 425
Accounts receivable, net:
Due from factor 20,657 22,744
Other 4,382 3,293
Inventories 44,909 45,122
Deferred income taxes 737 827
Other current assets 2,152 1,745
-------- --------
Total current assets 73,404 74,156
-------- --------
PROPERTY, PLANT AND EQUIPMENT - at cost:
Land, buildings and improvements 32,060 23,982
Construction projects in process 666 1,823
Machinery and equipment 54,584 45,061
Furniture and fixtures 1,735 1,215
-------- --------
89,045 72,081
Less accumulated depreciation 29,583 23,182
-------- --------
Property, plant and equipment - net 59,462 48,899
-------- --------
OTHER ASSETS 1,165 293
-------- --------
TOTAL $134,031 $123,348
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 15,070 $ 9,860
Accounts payable 10,666 13,436
Income taxes payable 687 579
Accrued liabilities 5,026 4,708
Current maturities of long-term debt 5,000 5,000
-------- --------
Total current liabilities 36,449 33,583
-------- --------
LONG-TERM DEBT 5,000 10,000
-------- --------
DEFERRED INCOME TAXES 4,933 3,778
-------- --------
OTHER LIABILITIES 649 602
-------- --------
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common stock - par value $1.00 per share;
15,000,000 shares authorized 9,004 8,836
Additional paid-in capital 33,811 31,645
Retained earnings 51,352 41,318
Common stock held in treasury - at cost (7,167) (6,414)
-------- --------
Total shareholders' equity 87,000 75,385
-------- --------
TOTAL $134,031 $123,348
======== ========
See notes to consolidated financial statements
- --------------------------------------------------------------------------------
F-3
20
- --------------------------------------------------------------------------------
CROWN CRAFTS, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended
-----------------------------------------------------
APRIL 2, April 3, March 28,
($ in thousands, except per share amounts) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
Net Sales $ 210,963 $ 187,335 $ 151,256
Cost of products sold 164,232 149,337 121,371
---------- ---------- ----------
Gross profit 46,731 37,998 29,885
Marketing and administrative expenses 27,848 22,622 18,508
---------- ---------- ----------
Earnings from operations 18,883 15,376 11,377
Other income (expense):
Interest expense (1,992) (1,559) (862)
Other - net 589 309 692
---------- ---------- ----------
Earnings before income taxes 17,480 14,126 11,207
Provisions for income taxes 6,430 5,116 3,868
---------- ---------- ----------
Net earnings $ 11,050 $ 9,010 $ 7,339
========== ========== ==========
Net earnings per share $ 1.31 $ 1.08 $ 0.89
========== ========== ==========
Average shares outstanding 8,457,333 8,368,320 8,287,068
========== ========== ==========
See notes to consolidated financial statements
- --------------------------------------------------------------------------------
F-4
21
- --------------------------------------------------------------------------------
CROWN CRAFTS, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Additional Treasury Stock Total
Common Paid-In Retained ------------------- Shareholders'
($ in thousands) Stock (1) Capital Earnings Shares Cost Equity
---------------------------------------------------------------------------
Balances - March 29, 1992 $8,624 $29,122 $26,970 369,326 $(5,491) $59,225
Excercise of stock options 88 737 825
Treasury stock acquired in
conjunction with exercise
of stock options 18,371 (315) (315)
Tax benefit from exercise
of stock options 247 247
Cash dividends declared
($0.12 per share) (996) (996)
Net earnings 7,339 7,339
------ ------- ------- -------- ------- -------
Balances - March 28, 1993 8,712 30,106 33,313 387,697 (5,806) 66,325
Exercise of stock options 124 1,225 1,349
Treasury stock acquired in
conjunction with exercise
of stock options 32,428 (608) (608)
Tax benefit from exercise
of stock options 314 314
Cash dividends declared
($0.12 per share) (1,005) (1,005)
Net earnings 9,010 9,010
------ ------- ------- -------- ------- -------
Balances - April 3, 1994 8,836 31,645 41,318 420,125 (6,414) 75,385
Exercise of stock options 168 1,921 2089
Treasury stock acquired in
conjunction with exercise
of stock options 44,063 (753) (753)
Tax benefit from exercise
of stock options 245 245
Cash dividends declared
($0.12 per share) (1,016) (1,016)
Net earnings 11,050 11,050
------ ------- ------- -------- ------- -------
BALANCES - APRIL 2, 1995 $9,004 $33,811 $51,352 464,188 $(7,167) $87,000
====== ======= ======= ======== ======= =======
- --------------------------
(1) Par value $1.00 per share; shares issued: 9,003,991 at April 2, 1995;
8,836,381 at April 3, 1994; 8,711,592 at March 28, 1993; and 8,623,892 at March
29, 1992.
See notes to consolidated financial statements
- --------------------------------------------------------------------------------
F-5
22
- --------------------------------------------------------------------------------
CROWN CRAFTS, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
---------------------------------------------------
APRIL 2, April 3, March 28,
($ in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net earnings $ 11,050 $ 9,010 $ 7,339
Adjustments to reconcile net earnings
to net cash provided by (used for)
operating activities:
Depreciation and amortization 7,104 5,229 3,680
Deferred income taxes 1,245 648 586
Gain on sale of property,
plant and equipment (234) (474) (44
Changes in assets and liabilities:
Accounts receivable 998 (6,986) (5,078)
Inventories 213 (1,774) (14,956)
Other current assests (407) (120) (3)
Other assets (872) 607 435
Accounts payable (2,770) 1,527 7,891
Income taxes payable 108 154 (157)
Accrued liabilities 318 1,790 119
Other liabilities 47 (85) (209)
-------- -------- --------
Net Cash Provided by (Used for)
Operating Activities 16,800 9,526 (397)
-------- -------- --------
INVESTING ACTIVITIES:
Capital expenditures (18,898) (11,858) (23,168)
Proceeds from sale of property,
plant and equipment 1,465 1,003 251
-------- -------- --------
Net Cash Used for Investing Activities (17,433) (10,855) (22,917)
-------- -------- --------
FINANCING ACTIVITIES:
Payment of long-term debt (5,000) (2,000) (2,000)
Increase in notes payable 5,210 3,260 6,600
Stock options exercised 1,581 1,055 757
Cash dividends (1,016) (1,005) (996)
-------- -------- --------
Net Cash Provided by Financing Activities 775 1,310 4,361
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 142 (19) (18,953)
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 425 444 19,397
-------- -------- --------
CASH AT END OF YEAR $ 567 $ 425 $ 444
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 4,831 $ 4,100 $ 3,255
======== ======== ========
Interest paid, net of interest capitalized
of $125 (1995), $407 (1994), and $918 (1993) $ 2,046 $ 1,573 $ 884
======== ======== ========
See notes to consolidated financial statements
F-6
23
- --------------------------------------------------------------------------------
CROWN CRAFTS, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of Crown Crafts, Inc. and its subsidiaries (collectively, the
"Company"). All material intercompany transactions and accounts have been
eliminated.
INVENTORIES: Inventories are valued at the lower of cost or market. Cost is
determined on a first-in, first-out basis.
DEPRECIATION: Depreciation of property, plant and equipment is computed
principally using the straight-line method over the following estimated useful
lives of the assets:
Buildings and improvements 15 to 40 years
Leasehold improvements Shorter of estimated useful life or term of lease
Machinery and equipment 4 to 7 1/2 years
Furniture and fixtures 8 years
REVENUE RECOGNITION: Sales are recorded at the time the merchandise is shipped,
and are reported net of returns and allowances in the consolidated statements
of earnings.
INCOME TAXES: Effective at the beginning of its fiscal year ended March 28,
1993, the Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 109. "Accounting for Income Taxes." The Statement requires the calculation
of deferred income taxes using the asset and liability method. Under this
method, deferred income tax balances are recorded based on the differences
between the financial statement and tax bases of assets and liabilities at the
tax rates in effect when these differences are expected to reverse. In all
years prior to fiscal 1993, the Company accounted for income taxes under the
provisions of Accounting Principles Board Opinion No. 11, "Accounting for
Income Taxes." The effect of the change to SFAS No. 109 in the period of
adoption was not material.
EARNINGS PER SHARE: Outstanding stock options were excluded from earnings per
share computations for each of the three years presented as they did not have a
materially dilutive effect.
FISCAL YEAR: The Company's fiscal year end is the Sunday nearest March 31. The
consolidated financial statements encompass 52 weeks of operations in 1995 and
1993 and 53 weeks in 1994.
RECLASSIFICATIONS: Certain reclassifications have been made to the 1994 and
1993 consolidated financial statements to conform to the 1995 presentation.
F-7
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Inventories
At April 2, 1995 and April 3, 1994, major classes of inventories were as
follows:
1995 1994
----------- -----------
Raw materials $24,846,000 $23,321,000
Work in process 2,831,000 3,421,000
Finished goods 17,232,000 18,380,000
----------- -----------
44,909,000 45,122,000
=========== ===========
3. Financing Arrangements
FACTORING AGREEMENT: The Company assigns substantially all of its trade
accounts receivable to a commercial factor. Under the terms of the factoring
agreement, the factor remits invoiced amounts to the Company on the approximate
due dates of the factored invoices. The Company does not borrow funds from its
factor or take advances against its factored receivables balances. Accounts are
factored without recourse as to credit losses but with recourse as to returns,
allowances, disputes and discounts. Factoring fees included in marketing and
administrative expenses in the consolidated statements of earnings were:
$1,702,000 (1995), $1,501,000 (1994) and $1,223,000 (1993).
NOTES PAYABLE: At April 2, 1995, the Company had uncommitted lines of credit
aggregating $30,000,000 with two banks at floating rates of interest which do
not exceed their prime lending rate. No fees or compensating balances are
required under these arrangements. The lines are cancellable at the banks'
discretion. Average annual borrowing and weighted average interest rates under
these arrangements for 1995 and 1994, respectively, were $17,720,000 at 5.6%
and $11,567,000 at 3.8%. The weighted average interest rates on outstanding
borrowings under these arrangements at April 2, 1995 and April 3, 1994,
respectively, were 6.7% and 4.3%.
LONG-TERM DEBT: At April 2, 1995 and April 3, 1994, long-term debt consisted
of:
1995 1994
----------- -----------
9.22% unsecured note payable,
due in semiannual installments of
$2,500,000 through November 1996 $10,000,000 $15,000,000
Less current maturities 5,000,000 5,000,000
----------- -----------
$ 5,000,000 $10,000,000
=========== ===========
Under the restrictive covenants of the note payable, the Company is required to
maintain both its working capital and current ratio at defined minimum levels,
and to reduce short-term indebtedness below defined maximum levels for sixty
consecutive days during each fiscal year. Other covenants limit, among other
things, additional indebtedness, the granting of security interests in the
Company's assets, payments of dividends and acquisition of treasury stock. At
April 2, 1995, the Company was in compliance with such restrictions and
limitations, and approximately $23,290,000 of retained earnings was available
for the declaration of dividends, acquisition of treasury stock or for certain
other restricted payments.
At April 2, 1995, the aggregate maturities of long-term debt were as follows
during the fiscal years ending:
1996 $ 5,000,000
1997 5,000,000
F-8
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Income Taxes
The provisions for income taxes are summarized as follows:
1995 1994 1993
---------- ---------- ----------
Current:
Federal $4,869,000 $4,196,000 $3,072,000
State 316,000 272,000 210,000
---------- ---------- ----------
Total Current 5,185,000 4,468,000 3,282,000
---------- ---------- ----------
Deferred:
Federal 1,082,000 610,000 513,000
State 163,000 38,000 73,000
---------- ---------- ----------
Total Deferred 1,245,000 648,000 586,000
---------- ---------- ----------
Total $6,430,000 $5,116,000 $3,868,000
========== ========== ==========
The tax effects of the significant temporary differences which comprise the
deferred tax liabilities and (assets) are as follows:
1995 1994
----------- -----------
Property, plant and equipment $ 4,513,000 $ 3,747,000
DISC earnings deferral 690,000 303,000
Other 502,000 420,000
----------- -----------
Gross deferred tax liabilities 5,705,000 4,470,000
----------- -----------
Employee benefits accruals (1,000,000) (929,000)
Accounts receivable reserves (290,000) (440,000)
Other (219,000) (150,000)
----------- -----------
Gross deferred tax assets (1,509,000) (1,519,000)
----------- -----------
Net liability $ 4,196,000 $ 2,951,000
=========== ===========
A reconciliation between the provisions for income taxes computed by applying
the applicable maximum federal statutory rates to earnings before income taxes
and the provisions for income taxes is as follows:
1995 1994 1993
---------- ---------- ----------
Income taxes at federal
statutory rates $6,118,000 $4,944,000 $3,810,000
State income taxes after
federal tax benefit 311,000 202,000 137,000
Other, net 1,000 (30,000 (79,000
---------- ---------- ----------
$6,430,000 $5,116,000 $3,868,000
========== ========== ==========
During February 1995, the Internal Revenue Service completed an examination of
the Company's consolidated federal income tax returns for each of the three
years in the period ended April 3, 1994. No additional income tax expense was
incurred by the Company as a result of this examination.
F-9
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Lease Commitments
At April 2, 1995, the Company's minimum annual rentals under non-cancellable
operating leases, principally for manufacturing, warehousing and office
facilities, were as follows:
Fiscal Year
---------------
1996 $2,155,000
1997 1,752,000
1998 1,540,000
1999 1,161,000
2000 897,000
Thereafter 1,915,000
----------
$9,420,000
==========
Total rent expense was $2,486,000, $1,620,000 and $1,308,000 for 1995, 1994 and
1993, respectively.
6. Stock Options
The Company has a Non-Qualified Stock Option Plan for granting to officers and
key employees options to acquire shares of the Company's common stock at prices
equal to the market price of the stock on the date of each grant. Options are
exercisable (on a cumulative basis) each year for up to one-third of the total
options granted, commencing one year from the date of grant, and expire at the
end of five years.
A total of 3,725,000 shares of common stock have been authorized for issuance
under the Plan. At April 2, 1995, 133,681 options were reserved for future
issuance. The options outstanding at April 2, 1995 expire through January 2000,
have an average exercise price of $14.51 and include 455,461 options
exercisable at April 2, 1995.
The following table summarizes stock option activity during each of the three
fiscal years in the period ended April 2, 1995:
1995 1994 1993
---------- ---------- --------
Outstanding, beginning of year 1,086,906 690,198 484,798
Granted 536,250 549,500 298,850
Cancelled (70,339) (28,003) (5,750)
Exercised (167,610) (124,789) (87,700)
---------- ---------- --------
Outstanding, end of year 1,385,207 1,086,906 690,198
========== ========== ========
Price range of options granted:
High $ 20.63 $ 19.75 $ 16.88
Low 14.63 13.25 14.63
Price range of options exercised:
High $ 15.25 $ 16.88 $ 13.63
Low 10.63 6.14 6.14
Average price of options exercised $ 12.46 $ 10.81 $ 9.41
Price range of options outstanding:
High $ 20.63 $ 19.75 $ 16.88
Low 10.63 10.63 6.14
Optionees may pay the option price of options exercised by surrendering to the
Company shares of the Company's stock the optionee has owned for at least six
months prior to the date of such exercise. Further, optionees may satisfy their
required tax withholding obligations upon the exercise of options by requesting
the Company to withhold the number of otherwise issuable option shares with a
market value equal to such tax withholding obligation.
F-10
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Employee Stock Ownership Plan
Crown Crafts, Inc. maintains an Employee Stock Ownership Plan which provides
for annual contributions by the Company at the discretion of the Board of
Directors for the benefit of eligible employees in the form of cash or the
Company's common stock. Participation in the Plan is open to all Company
employees who are at least twenty-one years of age and who have been employed
by the Company for at least one year. The Company recognized expense of
$750,000, $650,000 and $550,000 for its cash contributions to the Plan in 1995,
1994 and 1993, respectively.
8. Commitments
During fiscal 1996 the Company expects that its total capital expenditures for
property, plant and equipment will be approximately $ 29,000,000, of which
approximately $20,000,000 are firm commitments.
9. Segments and Major Customers
The Company operates in a single business segment procuring, producing and
selling a variety of textile home furnishings products directly to retailers.
Revenues attributable to foreign customers are not material.
The Company's sales to Wal-Mart Stores, Inc. constituted 17.3%, 16.1% and 17.3%
of net sales, respectively, in 1995, 1994 and 1993. The Company's sales to J C
Penney Company constituted 11.8% of net sales in 1994.
F-11
28
- --------------------------------------------------------------------------------
CROWN CRAFTS, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
ANNUAL REPORT ON FORM 10-K
Selected Quarterly Financial Information
- --------------------------------------------------------------------------------
UNAUDITED
First Second Third Fourth
($ in thousands, except per share amounts) Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED APRIL 2, 1995
Net sales $39,713 $55,945 $59,702 $55,603
Gross profit 7,626 12,668 14,501 11,936
Net earnings 1,243 3,122 4,165 2,520
Net earnings per share 0.15 0.37 0.49 0.30
FISCAL YEAR ENDED APRIL 3, 1994
$34,543 $47,014 $56,281 $49,497
Net sales 6,525 9,843 11,757 9,873
Gross profit 1,150 2,586 3,016 2,258
Net earnings 0.14 0.31 0.36 0.27
Net earnings per share
F-12
29
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has neither changed its independent accountants nor had
any disagreements on accounting or financial disclosure with such accountants.
PART III
The Company's Proxy Statement to be filed in connection with its
Annual Meeting of Shareholders on August 8, 1995 is hereby incorporated herein
by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. FINANCIAL STATEMENTS
The following consolidated financial statements of Registrant are
filed with this report and included in Part II, Item 8:
Page
Independent Auditors' Report...................... F-2
Consolidated Balance Sheets as of
April 2, 1995 and April 3, 1994.................. F-3
Consolidated Statements of Earnings
for the Three Fiscal Years in the
Period Ended April 2, 1995....................... F-4
Consolidated Statements of Changes in
Shareholders' Equity for the Three Fiscal
Years in the Period Ended April 2, 1995.......... F-5
Consolidated Statements of Cash Flows
for the Three Fiscal Years in the
Period Ended April 2, 1995....................... F-6
Notes to Consolidated Financial
Statements....................................... F-7
16
30
(a)2. FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule of Registrant is filed with
this report:
Schedule VIII- Valuation and Qualifying Accounts......18
All other schedules not listed above have been omitted because they
are not applicable or the required information is included in the financial
Statements or notes thereto.
17
31
- --------------------------------------------------------------------------------
CROWN CRAFTS, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
ANNUAL REPORT ON FORM 10-K
Schedule VIII - Valuation and Qualifying Accounts
- --------------------------------------------------------------------------------
($ in thousands)
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------
Additions
Balance at Charged to Balance at
Beginning Costs and End of
Description of Period Expenses Deductions* Period
- ----------- --------- -------- ----------- ------
Accounts Receivable Valuation Accounts:
Year Ended March 28, 1993:
Reserve for doubtful accounts $229 $132 $162 $199
Reserve for customer deductions 213 188 401
Year Ended April 3, 1994:
Reserve for doubtful accounts $199 $124 $ 30 $293
Reserve for customer deductions 401 457 858
Year Ended April 2, 1995:
Reserve for doubtful accounts $293 $ 55 $318 $ 30
Reserve for customer deductions 858 135 723
* Deductions from the reserve for doubtful accounts represent the amount of
accounts written off reduced by any subsequent recoveries.
18
32
(a)3. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
The following Executive Compensation Plans and Arrangements are filed
with this Form 10-K or have been previously filed as indicated below:
1. Crown Crafts, Inc. Non-Qualified Stock Option Plan. (6) (Exhibit
10(b)(i))
2. Philip Bernstein Death Benefits Agreement dated March 30, 1992
(5) (Exhibit 10(b)(ii))
3. Description of Crown Crafts, Inc. Executive Incentive Bonus Plan
(5) (Exhibit 10(b)(iii))
(a)5. EXHIBITS
Exhibits required to be filed by Item 601 of Regulation S-K are
included as Exhibits to this report as follows:
EXHIBIT
- -------
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
3(a) Restated Articles of Incorporation of Registrant. (1)
3(b) Bylaws of Registrant. (2)
4(a) Instruments defining the rights of security holders are contained in the Restated Articles of
Incorporation of Registrant, and Article I of the Restated Bylaws of Registrant. (6)
10(a)(i) 9.22% Note Agreement with The Prudential Insurance Company of America. (3)
10(a)(ii) Letter Agreement with The Prudential Insurance Company of America dated July 23, 1991. (4)
10(a)(iii) Letter Agreement with The Prudential Insurance Company of America dated April 9, 1992. (4)
10(a)(iv) Letter Agreement with The Prudential Insurance Company of America dated May 21, 1993. (5)
10(a)(v) Letter Agreement with The Prudential Insurance Company of America dated July 14, 1994
10(a)(vi) Letter Agreement with The Prudential Insurance Company of America dated July 29, 1994
19
33
10(a)(vii) Letter Agreement with The Prudential Insurance Company of America dated March 31, 1995
10(b)(i) Crown Crafts, Inc. Non-Qualified Stock Option Plan. (6)
10(b)(ii) Philip Bernstein Death Benefits Agreement dated March 30, 1992. (5)
10(b)(iii) Description of Crown Crafts, Inc. Executive Incentive Bonus Plan. (5)
21 Subsidiaries of the Registrant
23 Consent of Deloitte and Touche, LLP
27 Financial Data Schedule (for SEC use only)
There were no reports on Form 8-K during the quarter ended
April 2, 1995.
_____________________
(1) Incorporated herein by reference to exhibit of same number to
Registrant's Annual Report on Form 10-K for the fiscal year ended April 2,
1989.
(2) Incorporated herein by reference to exhibit of same number to
Registrant's Annual Report on Form 10-K for the fiscal year ended April 1,
1990.
(3) Incorporated herein by reference to exhibit of same number to
Registrant's Annual Report on Form 10-K for the fiscal year ended March 31,
1991.
(4) Incorporated herein by reference to exhibit of same number to
Registrant's Annual Report on Form 10-K for the fiscal year ended March 29,
1992.
(5) Incorporated herein by reference to exhibit of same number to
Registrant's Annual Report on Form 10-K for the fiscal year ended March 28,
1993.
(6) Incorporated herein by reference to exhibit of same number to
Registrant's Registration Statement on Form S-8, filed April 8, 1994. (Reg. No.
33-77558).
20
34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CROWN CRAFTS, INC.
BY: /s/ MICHAEL H. BERNSTEIN
----------------------------
Michael H. Bernstein
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
SIGNATURES TITLE DATE
---------- ----- ----
/s/ MICHAEL H. BERNSTEIN President and Chief Executive June 29, 1995
- ------------------------ Officer, Director
Michael H. Bernstein
Chairman of the Board June 29, 1995
- ----------------
Philip Bernstein
/s/ E. RANDALL CHESTNUT Director June 29, 1995
- -----------------------
E. Randall Chestnut
/s/ ROGER D. CHITTUM Director June 29, 1995
- --------------------
Roger D. Chittum
/s/ PAUL A. CRISCILLIS, JR. Director and Chief Financial June 29, 1995
- --------------------------- Officer
Paul A. Criscillis, Jr.
/s/ PATRICIA G. KNOLL Director June 29, 1995
- ---------------------
Patricia G. Knoll
/s/ RUDOLPH J. SCHMATZ Director June 29, 1995
- ----------------------
Rudolph J. Schmatz
/s/ JANE E. SHIVERS Director June 29, 1995
- -------------------
Jane E. Shivers
35
Director June 29, 1995
- ----------------
Alfred M. Swiren
Director June 29, 1995
- ---------------
Richard N. Toub
/s/ ROBERT E. SCHNELLE Chief Accounting Officer, June 29, 1995
- ---------------------- Treasurer
Robert E. Schnelle